Friday, August 6, 2010

Can We Get a Redo?

Romer had run simulations of the effects of stimulus packages of varying sizes: six hundred billion dollars, eight hundred billion dollars, and $1.2 trillion. The best estimate for the output gap was some two trillion dollars over 2009 and 2010. Because of the multiplier effect, filling that gap didn’t require two trillion dollars of government spending, but Romer’s analysis, deeply informed by her work on the Depression, suggested that the package should probably be more than $1.2 trillion. The memo to Obama, however, detailed only two packages: a five-hundred-and-fifty-billion-dollar stimulus and an eight-hundred-and-ninety-billion-dollar stimulus. Summers did not include Romer’s $1.2-trillion projection. The memo argued that the stimulus should not be used to fill the entire output gap; rather, it was “an insurance package against catastrophic failure.” At the meeting, according to one participant, “there was no serious discussion to going above a trillion dollars.”

The people who are always wrong about fucking everything maintain power.

It's Frontline's "Warning" all over again. Summers ego and overt sexism won't be denied its ability to continually damage our economy. Romer was one of the bright spots of the economic team.

Whatever the exact details of the palace intrigue might turn out to be, it's clear that Romer was a strong advocate for pressing the pedal to the metal on recovery efforts. At a time when many of the President's advisers, including Summers, have urged him to put on the brakes to mollify the (fictitious) "bond vigilantes", Romer was a beacon of sanity. To the extent that her departure makes it less likely that the administration will push Congress to accelerate jobs creation, losing her voice will be a double whammy, jeopardizing the economic recovery and the White House's political fortunes along with it.

Any happy joy joy feelings should be probably come back to reality right about now. 1937 here we come...

Disclaimer

If you don't want me to link or post something of yours, please simply email me and I will gladly take it down. If you're cool, I'm cool.
The work here is solely of the author, share it as you like, just link it and give me my due.